What replacement analysis technique can be used

Reference no: EM131064387

Problem 13-9 - In this problem you are to determine when the existing drill press (the defender) purchased two years ago for

$40,000 should be replaced by the new drill press (the challenger) having the uniform annual cost (UAC) of $7000. The yearly cost data for the defender are available in the problem and tabulated in the table in part (a). Solve this problem by completing the marginal cost table and answer questions below.

a) Complete the marginal cost table of the defender below (ref. Example 13-3 and 13-4)

YEAR	MARKET VALUE (MV)	MARGINAL COSTS FOR YEAR n				If equip. is kept to year n
YEAR	MARKET VALUE (MV)	LOST IN MV	INTEREST ON MV	O & M COSTS	TOTAL MARGINAL COSTS	PWC Marginal Costs	EUAC Marginal Costs
0 (Now)	$15,000
1	$12,000	$3,000	$1,500	$2,700	$7,200	$6,545	$7,200
2	$10,000	$2,000		$2,900
3	$8,000	$2,000		$3,300
4	$6,000	$2,000		$3,700
5	$4,000	$2,000		$4,200
6	$2,000	$2,000		$4,700

b) Is the total marginal cost increasing or decreasing?

c) What replacement analysis technique can be used in this case?

d) When should the drill press be replaced with the new drill press having EUAC of $7000?

Problem 13-10 - Complete the table below to confirm $17,240 is the minimum UAC if the machine is kept to year 4.

YEAR	CASH FLOW			If equip is kept to year n
n	Equip. Cost	SV = MARKET VALUE	Maintenance	PW to year n	EUAC To year n
0	-$50,000
1		$40,000	-$3,500
2		$32,000	-$5,500
3		$25,600	-$7,500
4		$20,480	-$9,500		-$17,240
5		$16,384	-$11,500
6		$13,107	-$13,500

Problem 13-23 - Complete the table below and determine the economic life of the pipe: years.

YEAR	MARKET VALUE (MV)	MARGINAL COST FOR YEAR n				If equip. is kept to year n
YEAR	MARKET VALUE (MV)	LOST IN MV	INTEREST ON MV	O & M COSTS	TOTAL MARGINAL COSTS	PWC Marginal Costs	EUAC Marginal Costs
0	$25	$0
1	$0	-$25	-$4	-$8.50	-$37.25	-$32.39	-$37.25
2	$0	$0	$0	-$14.50
3	$0	$0	$0	-$20.50
4	$0	$0	$0	-$26.50
5	$0	$0	$0	-$32.50

Problem 13-50 - Complete the tables below to determine the after-tax costs of keeping the old folklift and the new folklift. Should the company kept the old folklift for the present or replace it now with the new one?

KEEP OLD FOLKLIFT

YEAR	BTCF	SL Depr.	TI	Income Tax @ 40%	ATCF	EUAC if kept to year n
0	$0
1	-$400	$0
2	-$600	$0
3	-$800	$0
4	-$1,000	$0
5	-$1,400	$0
6	-$1,400	$0	-$1,400	$560	-$840	-$531
7	-$1,400	$0	-$1,400	$560	-$840	-$565
8	-$1,400	$0	-$1,400	$560	-$840	-$591
9	-$1,400	$0	-$1,400	$560	-$840	-$611
10	-$1,400	$0	-$1,400	$560	-$840	-$627

BUY NEW FORKLIFT

YEAR	BTCF	SL Depr.	TI	Income Tax @ 40%	ATCF	EUAC if kept to year n
0	-$6,500				-$6,500
1	-$50	$650	-$700	$280	$230	-$6,790
2	-$50	$650	-$700	$280	$230	-$3,415
3	-$50	$650	-$700	$280	$230	-$2,292
4	-$50	$650	-$700	$280	$230	-$1,732
5	-$50	$650
6	-$50	$650
7	-$50	$650
8	-$50	$650
9	-$50	$650
10	-$50	$650

Problem 14-23

1) In the table below, calculate yearly inflation rate and the average inflation rate for the last 5 years.

Years ago	Average Home Price	Inflation Rate
5	$265,000
4	$267,000
3	$272,000
2	$280,000
1	$283,000
0	$288,000
	Average =

2) What is your estimate of the inflation rate for next year?

Reference no: EM131064387

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